Recent Examples of revenue bond from the Web
In December 2018, the district plans to issue a $10 million non-referendum alternate revenue bond, which is the legal amount the district can bond without voter approval, according to the timeline.
The council also unanimously approved issuing up to $48 million in private activity revenue bonds for the Westbrooke Green redevelopment project at the northeast corner of West 75th Street and Quivira Road.
Walter Jones, senior vice president of campus transformation, outlined the status of the MetroHealth Transformation plan, funded by $945.7 million in hospital revenue bonds the health system issued in 2017.
In that case the borough issued revenue bonds on the state's commitment to pay through its lease of borough lands.
MetroHealth last year issued $946 million in hospital revenue bonds, $112 million of which is other debt, to finance its campus transformation project.
The utility has proposed to pay for the renovation through revenue bonds, and Zurn said there will not be an energy-rate increase associated with the repower.
Peskin is also backing a measure authorizing the Public Utilities Commission to issue revenue bonds for power facilities.
Another $27 million was borrowed in a revenue bond in 2016.
These example sentences are selected automatically from various online news sources to reflect current usage of the word 'revenue bond.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
First Known Use of revenue bond
Financial Definition of REVENUE BOND
What It Is
How It Works
Let's assume ABC Town wants to build a new toll road, but it doesn't have the money to fund the construction. It could issue revenue bonds, and the tolls collected from the toll road would fund the interest and principal payments. If the revenue from the toll road is insufficient, ABC Town might not be able to make timely interest and principal payments. In many cases, revenue bond issuers can avoid or delay interest payments if a minimum amount of revenue is not generated from the project.
Revenue-bond holders generally have no claim to the project’s assets (i.e., they cannot repossess the toll road if it does not generate the promised interest and principal payments). Revenue bonds may also have catastrophe call provisions, which allow the issuer to call the bonds if the revenue-producing facility is destroyed. Thus, revenue bonds generally warrant a higher yield than general obligation bonds to compensate for these added risks.
Revenue bonds usually have $1,000 or $5,000 face values. They usually pay interest semiannually, although some are zero-coupon bonds. Typical maturities are one to 30 years. Many are serial bonds, and many are callable or putable, and some have unusual payment schedules. The issuer sets forth the terms of the debt in the indenture agreement.
Revenue bonds are typically issued the same way corporate bonds are: through an underwriter that presents a written prospectus to buyers and facilitates a competitive bidding process. After the bonds begin trading, municipal bond dealers across the country earn spreads by acting as intermediaries between buyers and sellers. Although purchasing specific revenue bonds and other municipal bonds gives investors direct control over which bonds they hold and the location of the issuers (thus maximizing tax advantages), mutual funds and municipal bond investment trusts are the most common way to invest in revenue bonds and other municipal bonds.
Municipal bonds, in general, rank between agency bonds and corporate bonds in risk and return. As with all debt, they are subject to credit, interest-rate, call, and market risk. To mitigate default risk, some issuers carry private insurance on their bonds (investors can also purchase this insurance). In some cases, a federal agency might guarantee or insure a revenue bond issue. Some issuers also back their bonds with a commercial bank letter of credit or escrow funds.
Why It Matters
One of the largest advantages of investing in revenue bonds is that the interest is usually exempt from federal taxes and most state and local taxes if the investor lives in the state or municipality issuing the debt (capital gains on municipal bonds are taxable, however). Although investors subject to the alternative minimum tax may be subject to taxes, for the most part the exemption means that investors in high federal-tax brackets benefit from revenue bonds and other municipal bonds. This is why there is usually stronger demand for revenue bonds and other municipal bonds in high-tax states (although this demand in turn lowers the yields of these bonds relative to those issued in low-tax states).
As with all bonds, revenue bond prices rise when interest rates fall, and fall when interest rates rise. Inflation can cut significantly into a revenue bond's modest returns (relative to corporate bonds), although variable-rate revenue bonds do offer some protection against this.
Pending or suspected tax legislation can dramatically affect the value of revenue bonds. Remember, the higher the marginal tax rate, the more valuable a revenue bond's tax exemption is. If a state or the federal government reduces tax rates, revenue bonds lose some of their advantage for high-tax-bracket individuals (and thus become less valuable). Another risk is that the IRS may decide to tax municipal bond income or revoke the exemption of a particular issue.
Learn More about revenue bond
Britannica.com: Encyclopedia article about revenue bond
Seen and Heard
What made you want to look up revenue bond? Please tell us where you read or heard it (including the quote, if possible).